Medco's Clash With Clarity

Goebel says that retail pharmacies push generic substitution because the PBMs secretly allow the pharmacies to keep co-payments that, at times, exceed the entire cost of the drug. Meanwhile, he says, the PBMs' own mail-order pharmacies lure generic-drug users -- increasingly through mandatory employer-sponsored programs -- by promising big discounts off of high-priced drugs and then filling the prescriptions with lower-priced alternatives. Moreover, he says, the PBMs convince their clients to pick up part of the co-payments for mail-order prescriptions in order to receive a discounted price that, in fact, often exceeds what retail pharmacies charge.

"Health plans drive volume to mail-order -- and effectively agree to absorb additional co-pay expenses -- based on perceived savings," Goebel says in a white paper on the subject. But "in reality, co-pays associated with three-tier benefit designs have increased to the point where health plans are spending more money than they save by incentivizing members to use mail-order."

For example, he says, PBM clients can wind up covering a $20 co-payment in order to secure what turns out to be a smaller discount -- totaling perhaps $10 -- on a generic drug. But for some reason, he says, even major corporations have yet to figure this scheme out. Otherwise, he says, they might soon realize that buying the same drug from a retail pharmacy would make a lot more sense.

For its part, Medco says that it offers "a range of pricing models" -- including government-set MAC -- at the discretion of its clients. Moreover, the company says those clients can perform audits to make sure they receive all of the discounts and rebates promised under their contracts.

But Goebel, for one, sees conflicts in the end.

"These PBMs are not able to play an objective role in cost management because they profit more from mismanagement," he insists. "They serve two masters -- plan clients/payers and shareholders -- and cost-management will always be a secondary goal."